Banks sign low-interest commercial loan agreement for July 22 launch


Yesterday’s meeting between Minister Laporte and the bankers

The bankers met with Minister Pierre Laporte and the principal secretary for Finance and Trade, Dr Steve Fanny at Liberty House yesterday to sign a memorandum of understanding (MoU) on the provisions of loans to Small and Medium Enterprises (SMEs).

The signatories to the agreement with the ministry were Barclays Bank, the Bank of Baroda, Mauritius Commercial Bank (MCB), Habib Bank Limited (HBL), Nouvobanq, Seychelles Savings Bank and BMI Bank.

“On behalf of government I would like to thank you for the interest you have shown in this scheme,” said Mr Laporte to the bankers.

“It is important because it is an agreement that is credible, one that works and for this, government will be relying on the efforts and the active participation of the banks.”

The minister said the banks had recognised that the government is making a “significant effort” to provide help and support for small and medium-sized businesses.

The initiative will be launched within the next week, by which time there are expected to be trained customer service personnel available in all banks to deal with queries from the public related to the scheme.

“The banks have asked for a few more days to put the last remaining structures in place,” Mr Laporte said. “By Monday July 22 they will officially be open to queries from the public.”

Mr Laporte said the signing was a formalisation of discussions that go back to last year between the parties in trying to come to an agreement on the terms of the scheme.

The minister said an SME would only qualify for the scheme if it was making a revenue of not more than R5 million per annum. This, he added, applies to new businesses based on its projected cash flow as well as those already in operation.

“Government will be assisting businesses through the subsidised interest rate programme for up to R3 million,” he explained.
The chief executive of the Seychelles Savings Bank, Michael Benstrong, said the scheme was encouraging for all the parties.

“I think what makes the deal special for us is that the risk gets shared with the government and this will help the commercial banks to reach more SMEs,” he said.

Mr Benstrong cautioned that the banks would continue to follow normal procedures when assessing loan applications; and approvals would only be given to proposals that are viable.

For the first R1 million of the loan, clients will pay 5% of the interest rate and government will cover the remainder of the prime or base interest rate. For example, if the commercial bank’s interest rate is 8%, the client will pay 5% and the government will pay the remaining 3% on the first R1 million.

On the remaining R2 million, the clients will pay 7% of the interest rate and government will cover the remainder of the prime rate, meaning 1% if the prime rate is 8%.

If a client borrows more than R3 million from a commercial bank; for example if R4 million is borrowed, they will only benefit from the subsidised interest rate for R3 million. For the remaining R1 million the interest rate would be set at normal commercial lending rates.